David Shapiro back into ‘Raging Bull’ mode on SA stocks - and globally. Here’s why.

Summary

In this business news briefing, South Africa's favorite stock broker, David Shapiro, discusses the cyclical nature of the stock market and the potential for a bull market phase. He highlights the impact of interest rate changes on the market, suggesting that a decrease in rates could boost equity and bond markets. Shapiro also touches on the importance of the release of AI technology and its influence on market perspectives. He expresses optimism about South Africa's economic growth, emphasizing the need for bold moves by the Reserve Bank and the potential of commodity sectors to drive the market. Additionally, he mentions the significance of fast internet access for keeping up with global technological advancements.

Takeaways

• 📈 The conversation discusses a potential shift into a bull market phase for South Africa, driven by a global market upturn and the impact of interest rate changes.
• 🌐 There's a recognition that global markets have been challenging due to high interest rates, but recent developments, such as the release of ChatGPT, have provided a fresh perspective.
• 📉 The script highlights the importance of interest rate cuts as a catalyst for market growth, with expectations of a series of cuts through to the end of 2025.
• 💼 The discussion touches on the economic pressures faced by businesses due to high borrowing costs, emphasizing the need for significant rate reductions to stimulate growth.
• 📊 The speakers express optimism about the South African market, suggesting that it offers great value, particularly in small and mid-cap stocks, which are expected to outperform.
• 🏭 There's a focus on the commodity sector as a potential driver of the South African market, with mentions of recent movements in platinum shares indicating a possible turnaround.
• 🚀 The conversation includes a mention of Elon Musk and Starlink, suggesting that improved internet access could be a significant factor in South Africa's development.
• 🌟 The script references the influence of key business figures and their positive outlook on South Africa's economic prospects, citing factors like the government of national unity and infrastructure investment.
• 📉 The speakers discuss the challenges faced by certain companies, such as Metrofile and Arc Invest, suggesting that a slowdown in business volumes could be a concern.
• 💡 There's an emphasis on the need for careful stock selection, as not all companies or sectors may benefit equally from the anticipated market upturn.

Q & A

How long has the relationship between the interviewee and South Africa's favorite stock broker been?

The relationship has been going on longer than Nelson Mandela was in jail, which is over 27 years, as they first went on air together 27 and a half years ago.

What significant event in 2022 is mentioned in the script that influenced the market?

The release of ChatGPT in November 2022 is mentioned as an event that put a different perspective on the market.

What is the current expectation regarding interest rates globally and in South Africa?

The expectation is that interest rates will start to drop, which is likely to lead to a bull market. The debate is about the extent of the rate cuts, whether it will be 50 points or 25 points.

Why are interest rates dropping significant for the economy?

Interest rate drops are significant because they boost confidence in the economy, allow businesses to borrow at lower costs, and stimulate spending and economic growth.

What is the current state of the United States' labor market according to the script?

The labor market in the United States is starting to feel the pressure and is slowing down, which is a point of concern for policymakers.

What is the term 'small and midcaps' referring to in the context of the stock market?

Small and midcaps refer to companies with a smaller market capitalization, typically those that are not as large as the major industry leaders but are larger than the smallest companies.

What does the script suggest about the future of the commodity market, particularly in South Africa?

The script suggests that the commodity market, especially in South Africa, might be a surprise factor for an upside turn, with Platinum shares showing signs of recovery.

What is the significance of Elon Musk's Starlink in South Africa according to the script?

The script highlights the importance of Elon Musk's Starlink for South Africa, as it could provide fast internet access, which is essential for keeping up with technological advancements globally.

What are the two factors mentioned in the script that are making certain investment gurus upbeat about South Africa?

The two factors mentioned are the government of national unity being sustained and the efforts of ESKOM to keep South Africa away from load shedding.

What is the concern regarding Metrofile and Arc Invest as per the script?

The concern is that Metrofile's technology may have fallen behind, and for Arc Invest, the issue is that the intrinsic value of the underlying businesses doesn't match the share price, leading to a deep discount.

Outlines

00:00

📈 Pioneering Business Broadcasting and Market Insights

The conversation begins with a reflection on the long-standing partnership between the two speakers, dating back to the inception of Business Radio 27 years ago. They discuss the evolution of business broadcasting and the guest's role as a pioneer in the field. The discussion shifts to the current economic climate, with a focus on the potential for a bull market in South Africa. The speakers analyze global market trends, including the impact of high interest rates and the recent release of AI technology, which has shifted market perspectives. They also touch on the importance of confidence in the economy and the need for lower interest rates to stimulate business growth.

05:01

🌟 Small and Midcap Opportunities Amid Market Shifts

The second paragraph delves into the potential for investment in small and midcap companies, particularly in the context of a changing global market. The speakers discuss the current state of the US labor market and the pressure it faces, leading to expectations of interest rate cuts. They also debate the outlook for South Africa's monetary policy, with hopes for aggressive rate cuts to stimulate the economy. The conversation includes insights from investment experts who highlight the value of South African stocks, especially in the small and midcap segment, and the importance of identifying companies poised for growth in a rapidly changing world.

10:03

🛑 Commodity Market Dynamics and Economic Stimulus

In this segment, the speakers focus on the commodity market, particularly the platinum sector, as a potential driver for South Africa's market. They discuss the recent decision by Sab Stillwater to cut production and its impact on platinum prices. The conversation also touches on the broader economic context, including the slowing Chinese economy and the need for stimulus measures to boost global growth. The speakers express optimism about the potential for a market turnaround, driven by commodity prices and positive developments in South Africa's political and economic landscape.

15:04

🚀 Tech Innovations and the Importance of Fast Internet

The final paragraph discusses the rapid pace of technological innovation and its importance for South Africa's development. The speakers highlight the potential impact of Elon Musk's Starlink on the country's internet infrastructure and the broader implications for economic growth. They also touch on the challenges faced by certain companies, such as Metrofile and Arc Invest, in keeping up with technological advancements and market demands. The conversation concludes with a call for South Africa to prioritize fast internet access to stay competitive in the global market and to leverage new technological products.

Keywords

💡Stock Broker

A stock broker is a professional who executes orders on behalf of clients to buy and sell securities, such as stocks and bonds. In the context of the video, the host refers to himself as South Africa's favorite stock broker, highlighting his expertise and experience in the field of finance and investment. The video discusses various financial topics, making the role of a stock broker central to the discussion.

💡Business Radio

Business radio refers to radio programming that focuses on business news, market updates, and financial discussions. The script mentions the pioneer of business radio, indicating the importance of such media in shaping financial literacy and providing insights into market trends. The video's theme revolves around financial discussions, making business radio a relevant medium for such content.

💡Interest Rates

Interest rates are the cost of borrowing money and are determined by central banks. They have a significant impact on the economy, as they influence borrowing and lending activities. The video discusses the potential for interest rates to drop, which is a positive sign for equity and bond markets, as lower rates can stimulate economic growth by making borrowing cheaper for businesses and consumers.

💡Bull Market

A bull market is a period of time when the stock market is rising or is expected to rise. It is characterized by optimism, investment, and economic growth. The video suggests that the market might be entering a bull phase, indicating a positive outlook for investors and the economy in general.

💡Artificial Intelligence (AI)

Artificial intelligence refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The script mentions the release of Chat GPT, an AI technology, as a significant event that shifted market perspectives. AI is a growing field with implications for various industries, and its mention in the video underscores its importance in current economic discussions.

💡Equity Markets

Equity markets are where shares of stock in publicly traded companies are issued and traded. The video discusses the potential for equity markets to enter a strong phase, suggesting that investors might see increased returns on their investments as market conditions improve.

💡Bond Markets

Bond markets are where government and corporate bonds are bought and sold. The video suggests that bond markets, like equity markets, might also experience a strong phase, which could be attractive to investors seeking fixed income investments.

💡Commodity

A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. The video discusses commodities, particularly platinum, as a potential area of growth for the South African market. The script mentions that commodity prices and related stocks might be poised for an upward trend, which could positively impact the economy.

💡Small and Midcaps

Small and midcap stocks refer to companies with a relatively small market capitalization. The video suggests that these types of stocks, particularly in South Africa, might offer great value to investors. The discussion implies that these companies could be poised for growth and might outperform larger companies in the market.

💡Portfolio

A portfolio in finance refers to a collection of financial investments held by an investor. The video mentions that some investors focus on building portfolios of shares, which involves selecting a diverse range of stocks to spread risk and potentially increase returns. The script emphasizes the importance of picking the right stocks for a portfolio, which is a key strategy in investment.

💡Rand Hedge

A Rand hedge is an investment strategy used to protect against the depreciation of the South African Rand. The video discusses the Rand hedge in the context of the South African market, indicating that a significant portion of the market is made up of companies that earn less than 25% of their income in South Africa, thus providing a hedge against currency risk.

Highlights

David is recognized as a pioneer in business radio and TV in South Africa.

The discussion reflects on the cyclical nature of South Africa's stock market over the past 27 years.

There's a potential shift to a bull market driven by global interest rate changes.

The release of AI technology like Chat GPT has influenced market perspectives.

Interest rates globally are expected to drop, which historically boosts markets.

Confidence in the economy is linked to interest rates and consumer spending.

The importance of lower interest rates for business growth is emphasized.

There's a debate on the extent of the upcoming interest rate cut by the FED.

South Africa's central bank is expected to follow global trends in interest rate cuts.

The potential for commodity markets in South Africa to surprise on the upside is discussed.

The significance of the government of national unity for South Africa's economic outlook.

The impact of global technological advancements on South Africa's development.

Elon Musk's potential involvement with South Africa's internet infrastructure is noted.

The investment potential in small and mid-cap stocks in South Africa is highlighted.

The importance of selecting individual stocks over index tracking is discussed.

Reports on companies like Metrofile and Arc Invest indicate a slowing business volume.

The intrinsic value of companies and their share prices may not align due to market dynamics.

Transcripts

[Music]

South Africa's favorite stock broker and

I have had a

long relationship going back sure David

longer than Nelson Mandela was in jail

and I can actually say that with some

confidence now because this is our first

edition of business business news

briefing

and we had the first edition of Business

Radio 27 A2 years ago at the sabc you

remember that you remember coming into

those studios in the dungeon I do very

much and it was very short it wasn't and

I have to credit you with actually being

the pioneer of business radio and

business TV and I think you set the pace

which of course has grown dramatically

since then but you were a Pioneer yeah I

got lucky I was I went to the sabc if

you recall

1991 after medo was led out of jail and

then spent some time spent some time

there and got to understand a little bit

more about broadcasting because

broadcasting for most South African

journalists was there wasn't really a

place that you could go and learn from

and then as we went forward in when I

started manone web Dave remember then we

wanted to make we wanted to make some

cheap content cuz it was so small and

then you came into those Studios of the

sabc anyway so it's 27 and 1/2 years ago

that you and I were on air for the first

time so this being the first bus news

brief you're the only person that I

could be talking to so thank you again

for all the service you've given to

South Africa and indeed to our community

it's extraordinary though when you have

a look at South Africa because talking

about all those years ago reminds me

that we go in Cycles don't we South

Africa has gone through in those 27

years sometimes where people were

rushing into the stock market and other

times where they were just selling

anything they could of South Africa and

right now I get a feeling we might be

going back into the bull

phase are we going into a bull market

there's no doubt about that Global ball

market and aleec I don't think people

appreciate uh the kind of Market we're

going into I think what we forget and

I'm just giving a quick Global

Perspective we've had four years of very

difficult markets in which interest

rates globally have gone up dramatically

the only thing that kind of offset it or

cushioned it was an event in November 22

when with the release of chat GPT which

put a different perspective on the

market but if it wasn't for the release

of artificial intelligence of that of

the money that was spent there we would

have gone through two and a half three

years of very difficult markets dragged

down by high interest rates and the

impact that it had not only on

businesses but consumers but what's

happened now that's being reversed from

probably Wednesday when the FED meets to

our meeting on Thursday you're going to

we going to start a succession of

interest rates which could go on right

through to the end of 2025 and when

rates come down Alec then markets go so

I think we going into a very strong

phase of equity markets and probably

Bond markets as well it's an interesting

point you make there because over the

long term when interest rates start

dropping is the time you should be

owning

shares exactly and the reason is obvious

because I think it's number one

confidence you'll see that from Once

rates go down and confidence returns

into an economy mainly because people

are getting more money in the back

pocket and they start to spend it Al

companies are not dragged down by

interest ratees I was looking at growth

point uh results the other day you know

when you're paying this rates it's

almost impossible to make ends meet you

know the prime rate not that growth

point would pay these levels but the

prime rate's 11 and 3/4% and it no

business can survive if you're borrowing

money at those kind of levels so we need

rates to come down dramatically you know

it's the same kind of thing in the

United States where rates are you know

over 5% so it's very difficult uh for

businesses to move forward and therefore

when rates start coming down it's it's

it's a big driver of economic growth how

confident are we that interest rates

will be cut on Wednesday in the United

States and then triggering similar Cuts

around the world it's not a debate of

whether they will be cut it's the rate

at which they're going to be cut the big

debate is it going to be 50 points is it

going to be 25 points and whatever

there's if in fact I can't find any

Clear View because there is so much

around is the camp that believes that

the FED has got a dual mandate which is

not only inflation it's also a

employment and the labor market in the

US is starting to feel the pressure it's

slowing down and you don't want it to

slow down too much you know that you you

bring about a recession so I think you

will find the two camps those who

believe a 50 point necessary I think

it's almost 60% of uh views that it

would be 50 points the others is it

could be 25 points so whatever is it

doesn't matter it's only that if it's 25

this meeting it'll be another succession

of 25 points right through to the end of

25 where the general view in the US is

that rates could come down by as much as

222 2 2 qu% 225 basis points of that

which will make a huge difference to to

spending and confidence in the US and we

will follow suit we need to come

dramatically we need a lot more than 220

25 points I think a good 45% down here

so what are you expecting on Thursday in

South Africa given that the FED is going

to make their decision on Wednesday I

hope they change their minds I hope the

FED is 50 and I hope we're more than 25

because I think that at in in South

Africa I'm in the camp that we need

growth we really need something to

kickart take start with economy and I

think is almost in my view tokenism and

I think sometimes the Reserve back needs

to be a little bold in understanding

what the what the underlying economy is

doing we need it Al we need it here and

it's you pick it up in the results I

know that markets are running ahead and

share prices are picking up but you need

that's one part of the equation the

other part is the actual real economy

where people are under huge pressure in

terms of just making ends meat so I'm

hoping that the reserve bank's a little

bold and goes beyond just qu% we had the

first bus news investment conference on

Thursday here in hermanus and David CH

David chapiro was absent but you will be

I hope with us in March but we did have

pit fun and S Jacobs and their message

was very clear it was watch out in the

United States those markets or there

certain stocks there that are very toppy

but South Africa is offering great Great

Value and particularly what they call

small and midcaps maybe you can just

unpack what that means small and midcaps

and then indeed if there are any views

of theirs that you would

share I I think we all going to

benefit in other words I don't think I I

know there's a view that America is

overpriced I don't share the view that

America is going to come down because

you will find the market continuing

upward even though you might find the

daating if I can explain that it means

that uh a lot of these companies the

tech companies that have led the way and

I think are still going to be relevant

for the next decade simply because they

have so much power and so much money

what might happen Alec is that they

might not increase at the same Pace that

they have but I don't think they're

going to fall over and I think where pit

and S are right yes there will be a

shift towards other businesses that will

catch up but you've got to know which

other businesses are going to catch up

because things have changed from Co just

to give you a view on that without

taking up too much time in this

conversation American beer sales were

down for were down to a 43 year mow and

why because habits have changed so

before we you know before we start

making predictions we've got to

understand how things things have

changed in the world and and which

companies are now going to benefit so

it's very important this could be a

subject of a whole discussion so you've

got to be very careful where you put

that money if you're taking it away from

Tech from our point of view the one

thing that has held us back here in this

market has been number one that we're

still very heavily reliant on a lot of

our offshore businesses but on the but

the one area that I'm stared to look for

the turn around and it might be

premature is on the commodity side and I

think that's going to be what's the word

I'm trying to say the one area that's

going to surprise us on the upside we've

been dragged down by China we've been

dragged down by concerns about global

growth but Alec if you look today even

today Platinum shares all of a sudden

from the very low levels are going up

and it's only been the and I say hold on

a sec Platinum price not doing much why

are these shares going up so fast why is

the slot money coming in and I think

that's going to be one of our surprise

factors is going to be on the commodity

side it it I might be premature I might

be too early but I'm looking for the

science of what can drive our market and

I think it's going to come from that

area now that's so interesting you make

a a point of that because s Jacobs

disclosed to us that he has started

buying Platinum shares on the strength

of the first person blinking which was

uh Sab Stillwater who cut 200,000 oun

off the Still Water Production last week

and he said it's been like all of the

Platinum companies have been looking at

each other and seeing the prices fall

but nobody has reacted and cut their

output to improve the demand sorry

improve the price and he says that he

saw this as a big thing last week he

took that as a signal and interesting

the point you make about the Platinum

sheares today uh which this is Monday

the 16th of September angular Platinum

up again uh and we seeing some of the

pre other precious me metal stocks going

too so are you nibbling in there David

given that they these Shares are down at

y multi-year lows it's I haven't started

yet but that doesn't mean I still think

there's plenty of time to make that

decision plenty of time and I think that

what will happen if I looked at CH today

the numbers coming out of there are

really poor and that economy is

struggling if I could say that if that's

a right word it's not really struggling

it's slowing down but I think we're

going to see stimulus coming there I

think the authorities there the

government there has to do something and

I think once the market gets a whiff of

that and it starts coming through you

know the iron oil price which is in the

low 90s now which is a very low level

it's normally a that's normally a level

from which it bounces we talking about

Platinum copper remember when BHP made

the bid for angos copper was 11,000 it's

now down in the 9000s early 9,000 so I

think all of these things will come

right in a global economy that is

starting to pick up and Al you said

markets are made of swings and

roundabouts and ups and down no one

rings the bell and says to you f up and

Alec and says Alec I think it's time for

you to

it happens so fast you know what I mean

and it happens with immense speed so

you've got to be when you start to see

these signals then you've got to make

the commitment and I'm very bullish for

the next couple of months next couple of

months starting and then into

2025 the other bull factors that s was

talking about in more broad terms were

the government of national Unity which

he believes will hold and then we had

the chairman of esim

MTI who was one of our key presented a

keynote that was so well received not

least by the investment gurus who were

there those are the two factors that is

making s Jacobs and and 361 and pit Fon

and the recm guys feel very upbeat about

South Africa what's your view on those

two government of national Unity being

sustained and esum being able to keep us

a away from lad cheating I think that's

a very that's those are positive moves

but I have to just mention one thing and

what I like about sigh and pit is that

they are not index trackers in other

words they buy portfolios they buy a

parcel of

shares okay and I'll tell you why I say

that because when I do the analysis of

the South African

Market 70% of the company IES of market

cap are made up of businesses who earn

less than 25% in South Africa in fact

I'm being generous with 25% I think

that'd earn probably 15 or less than 15%

of the income in South Africa the other

10 there's another 10% which of the m is

at foreign dollars but 80% of our market

for all intents and purposes is Rand

hedge and it's made up of old economy

stocks British American Tobacco uh call

the I call the resource companies old

economy and so on so the only 20% and

even that might be exaggerated of our

Market is saing and that's important now

if you're pit and if you're sigh and

you're focus on some really good

underlying businesses you're going to do

well you know what I mean you might even

see a PPC which is being slaughtered

absolutely trashed turn around at a

level that you can't believe as fixed

investment starts to happen here because

of the factors that you mentioned esum

government and National Unity the

transet all of those coming more

investment in infrastructure and that so

those companies your favorites Wilson

Bailey companies like that will start to

do incredibly well but you've got to

pick your stocks you can't just say I'm

going to buy the cetric or something

because then you probably not going to

do as well as an individual portfolio I

think that's where pit and are very

strong they talk about small and midcaps

and you've actually put your finger on

the button there Dave before we go two

last things the Elon Musk announcement

or reference from president Raposa last

week saying that he's now talking to

Elon this is on starlink we know that

the African countries have got starlink

and it's a fabulous product in South

Africa it's not coming yet because Elon

doesn't want to give away 30% to

politically well connected people he

refuses to do that but now we see almost

a change in Attitude by the by the

president saying he's talking to Elon

he's bringing come back here Elon come

to South Africa that's got to be a

little bit of an a bit of a ball Factor

you know why Alec

because um the world is moving at such a

fast pace I'm a big AR person I love big

Tech and I look at it all the time

and you can't keep Pace with it and it's

not only technology it's not only at

that level it's in the pharmaceutical

areas that we're seeing the weight loss

drugs so there's so much development

taking place in the world now which is

going to dominate where the spending is

and how we live and South Africa has to

make it the one thing that links us is

fast internet is in other words access

to all these new technological products

so it's when we hear that kind of stuff

it's very important for us we can't fall

back on on development that's that to me

is one of the biggest areas that we have

to that we have to focus on hoping that

it does happen that we are able to use

these products because it's essential

for us not to fall behind the rest of

the world and my last point is we've had

a couple of interesting companies

reporting today

metrofile Arc invest do you know much

about these two business businesses I

know metral very much it's part of svest

it goes back to the to to the late 80s

to so I know the company have a big

problem in fact if I look at oceo is

also out today as well as what are the

issues there is we starting to see

volumes fall and even if you follow the

retailers are sorry if I'm going

slightly off track but there's a point

that I want to make on vran and that's

slow down in business when volume start

to fall for that for concern and even in

the grow looking at both of those

results metral maybe their technology

has fallen behind I thought they keep up

but it's also an indication of a slowing

down of business with all the two the

underlying businesses are very good Alec

and they frustrated because their

intrinsic value doesn't match the share

price and other was is a deep discount

and I think one of the reasons is that

you're not quite sure what you're buying

no little bits of everything and the

same as the old days in rem gr when you

used to buy REM gr you knew you were

buying richmont in there or British

American Tob back what was then

rothman's or whatever it was so you

could identify what you were buying and

that's why you bought it I still think

Arc has got to refine its portfolio that

it's a couple of good businesses in

there that trct uh investors and the

discount will

nrow David chapiro South Africa favorite

stock broker and I'm Alec hog from

bus.com

[Music]